100,000 firms 'mis-sold rate swaps'

Up to 100,000 firms could have been mis-sold interest rate swaps, Business Secretary Vince Cable has said.

UK lenders are expected to face a compensation bill of at least £1 billion as a result of the "terrible scandal".

A review by the Financial Services Authority (FSA) published last month found more than 90% of small firms had been mis-sold the complex financial products.

The FSA looked at 173 cases where so-called interest rate swaps had been sold to small firms as part of a pilot study and said a "significant" proportion were likely to result in redress being due to the customer.

Tory Guto Bebb, MP for Aberconwy, called for clearer rules about which firms would be eligible for compensation.

"The FSA redress scheme for businesses mis-sold interest rate swap products excludes those businesses which had a live swap valued in excess of £10 million.

"This is despite the fact that those businesses would otherwise be categorised as unsophisticated by the FSA's own rules."

The Business Secretary congratulated Mr Bebb for his campaign on behalf of the "anywhere up to 100,000 companies that have been mis-sold these swaps, it is a terrible scandal".

He said: "There are some anomalies on the borderline, the definition of sophisticated companies isn't simply confined to scale."

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